Gross profit increased by $1.2 million or 3.7% (14.7% of sales, down from 15.4%).

Inventory decreased by $14.5 million or 2.9% and $46.1 million or 8.5% over Q1 2016 and Q2 2015, respectively.

Agriculture segment product support revenues reported an eleventh consecutive quarter of growth as compared to the same quarter in the prior year.

Operating SG&A(1) declined by $2.5 million or 10.2% (9.6% of sales, down from 11.7%).

Adjusted Diluted Earnings per Share(1) increased by $0.12 or 133.3% to $0.21.

Adjusted EBITDA(1) increased by $3.8 million or 79.3%.

Amalgamation of industrial distribution facilities located in Calgary and Red Deer, Alberta into existing agriculture facilities located in those areas, incurring one-time costs of $2.2 million.

(1) – See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.

"Continued execution of our strategy resulted in a strong second quarter, with some significant year-over-year improvements in a number of our key financial metrics," remarked Garrett Ganden, President & Chief Executive Officer of Rocky. "Our continuing focus on product support, combined with sales initiatives for new equipment, produced positive revenue and gross profit growth for the period. Product support sales in our agriculture segment have now experienced eleven consecutive quarters of growth, as compared to the prior year period. While sales mix and currency pressures resulted in lower gross margin for the quarter, our continued focus on cost containment allowed us to deliver significant bottom-line improvements over last year. Our operational performance also resulted in a strengthening of our balance sheet, as we were able to further reduce our inventory and related floor-plan payables in the quarter.

"The weather cooperated with farmers across much of our sales territory this quarter. Precipitation levels have returned to normal, or above-average, levels, and general crop conditions appear to be good. While commodity prices have softened somewhat in response to increased global supply, the prices for key Western Canadian crops remain healthy. Sentiment in the agriculture industry is very positive at present. With farmer balance sheets maintaining their record strength, the challenge before us is to continue presenting a compelling value proposition to our customers in all times and seasons. In this regard, I believe we have made significant inroads and are continuing on the right path.

"In May, 2016, we announced significant changes to our industrial equipment distribution strategy. Since then, we have successfully amalgamated our Calgary store into our existing stores in High River, and Balzac, Alberta. We have also amalgamated our two Red Deer, Alberta stores. Our strategy with respect to this restructuring continues to proceed on time and on budget. Our territory coverage for our industrial product distribution remains unchanged. Furthermore, we believe that the visibility of our industrial offerings will increase as a result of this restructuring, as these products will now be in front of more potential customers in the agriculture sector. Having addressed the fixed-cost structure associated with this line of business, we are optimistic that our industrial sales will contribute positively to our bottom line in the coming quarters."

Quarterly Cash Dividend

On August 9, 2016, Rocky's Board of Directors (the "Board") approved a quarterly dividend of $0.115 per common share on its outstanding common shares. The common share dividend is payable on September 30, 2016, to shareholders of record at the close of business on August 31, 2016.

This dividend is designated by Rocky to be an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any similar provincial or territorial legislation. An enhanced dividend tax credit applies to "eligible dividends" paid to Canadian residents. Please consult with your own tax advisor for advice with respect to the income tax consequences to you from Rocky designating its dividends as "eligible dividends." Investors are cautioned that quarterly dividends remain subject to approval by Rocky's Board, and that the Board may, at any time, increase, decrease or suspend payment of the dividend.

Conference Call

On Wednesday, August 10, 2016, Rocky will discuss its results via live conference call and audio webcast, beginning at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time). Senior management of Rocky will provide remarks on the period, followed by a question and answer session with analysts and institutional investors.

Those interested in participating in the conference call may do so by calling 1-888-231-8191 (toll free) or 1-647-427-7450. A live webcast of the conference call will also be accessible through Rocky's website at www.rockymtn.com.

An archived recording of the conference call will be available until Wednesday, August 24, 2016, by dialing 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 45536689. This archived recording will also be available via Rocky's website.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, statements that imply any future earnings, profitability, economic benefit or other financial results; statements regarding the seasonal nature of Rocky's core; statements discussing or implying any economic or financial results for 2016, including statements that Rocky is on the right track; statements implying future economic or financial benefits as a result of our cost-containment strategies; statements that the restructuring of our industrial distribution segment will increase visibility of our industrial offerings and expectations that industrial sales will increase in the coming quarters; and statements regarding our scheduled quarterly conference call, are forward-looking information within the meaning of applicable Canadian securities laws. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond Rocky's control. While this forward-looking information is based on information and assumptions that Rocky's management believes to be reasonable, there is significant risk that the forward-looking statements will prove not to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from that expressed in the forward-looking statements. Accordingly, this news release is subject to the disclaimer and qualified by risks and other factors discussed by Rocky in its management's discussion and analysis ("MD&A") for the quarter ended June 30, 2016, and as discussed in Rocky's Annual Information Form dated March 15, 2016 under the heading "Risk Factors." Except as required by law, Rocky disclaims any intention or obligation to update or revise forward-looking statements, and further reserves the right to change, at any time, at its sole discretion, its current practice of updating its guidance and outlooks.

About Rocky

Rocky is one of Canada's largest agriculture and industrial equipment dealership networks with branches located throughout Alberta, Saskatchewan, and Manitoba. Through its network of Rocky Mountain Equipment locations, Rocky sells, rents, and leases new and used agriculture and industrial equipment and offers product support and finance to its customers.

(1) – See further discussion of these non-IFRS measures in the "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.

NON-IFRS MEASURES

We use terms which do not have standardized meanings under IFRS. As these non-IFRS financial measures do not have standardized meanings prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers. Our definition for each term is as follows:

"Adjusted Diluted Earnings per Share" is calculated by eliminating from net earnings, the after-tax impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations.

The Company also adjusts for any non-recurring charges (recoveries) recognized in net earnings. Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations. Adjusting for these items allows management to isolate and analyze diluted earnings per share from core business operations. For the second quarter of 2016, costs associated with amalgamating the industrial segment operations have been classified as non-recurring charges.

"EBITDA" is a commonly used metric in the dealership industry. EBITDA is calculated by adding interest on long-term debt, income taxes and depreciation and amortization to net earnings. Adding back non-operating expenses allows management to consistently compare periods by removing changes in tax rates, long-term assets and financing costs related to the Company's capital structure.

"Adjusted EBITDA" is calculated by eliminating from EBITDA, the impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations.

The Company also adjusts for any non-recurring charges (recoveries) recognized in EBITDA. Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations. Adjusting for these items allows management to isolate and analyze EBITDA from core business operations. For the second quarter of 2016, costs associated with amalgamating the industrial segment operations have been classified as non-recurring charges.

"Operating SG&A" is calculated by eliminating from SG&A, the impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations.

The Company also adjusts for depreciation and amortization as well as any non-recurring charges (recoveries) recognized in SG&A. Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations. Adjusting for these items allows management to assess discretionary expenses from ongoing operations. For the second quarter of 2016, costs associated with amalgamating the industrial segment operations have been classified as non-recurring charges. We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.

"Floor Plan Neutral Operating Cash Flow" is calculated by eliminating the impact of the change in floor plan payable (excluding floor plan assumed pursuant to business combinations) from cash flows from operating activities. Adjusting cash flows from operating activities for changes in the balance of floor plan payable allows management to isolate and analyze operating cash flows during a period, prior to any sources or uses of cash associated with equipment financing decisions.

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

Adjusted Diluted Earnings per Share

$ thousands

For the three months ended

June 30,

For the six months ended

June 30,

2016

2015

2016

2015

Earnings used in the calculation of diluted earnings per share

3,366

2,029

3,630

2,361

Gain on derivative financial instruments

(1,469)

(597)

(1,217)

(164)

Loss (gain) on DSUs

79

17

70

(3)

SAR expense

90

87

84

110

Non-recurring industrial amalgamation charges

2,231

-

2,231

-

Tax effect of adjustments (27%)

(251)

133

(315)

15

Earnings used in the calculation of Adjusted Diluted Earnings per Share

4,046

1,669

4,483

2,319

Weighted average diluted shares used in the calculation of diluted earnings per share (in thousands)